1-Harry and Sally formed the Evergreen partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership:

Harry: Basis Fair Market Value

Cash $ 30,000 $ 30,000

Land 100,000 120,000

Totals $ 130,000 $ 150,000

Sally:

Equipment used in a business 200,000 150,000

Totals $ 200,000 $ 150,000

1. How much gain or loss will Harry recognize on the contribution?

2. How much gain or loss will Sally recognize on the contribution?

3. How could the transaction be structured a different way to get a better result for Sally?

4. What is Harrys tax basis in his partnership interest?

5. What is Sallys tax basis in her partnership interest?

6. What is Evergreens tax basis in its assets?

7. Following the format in Exhibit 20-2, prepare a tax basis balance sheet for the Evergreen partnership showing the tax capital accounts for the partners.